Suppose We Observe the Two Exchange Rates $\times$ /US$ = 100, A$/US$ = 1

question 62

Multiple Choice

Suppose we observe the two exchange rates: $\times$ /US$ = 100, A$/US$ = 1.5. If the current cross-rate ( $\times$ /A$) between $\times$ and A$ is 50, which of the following is true?

• A) The correct cross-rate (\(\times\)/A$) should be 33.33
• B) It costs less to buy \(\times\) with US$
• C) An US$33.33 arbitrage profit can be realized
• D) All of the above
• E) None of above

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